The Fed is fighting the wrong battle. Helicopter Ben Bernanke still believes that deflation is an economic threat. As a result, today's FOMC meeting is not likely to produce any shift in the key phrase “extended period,” which has been used by the central bank to signal a continuation of its free-money, zero-interest-rate policy.

The economic data show that Bernanke is wrong. Tuesday’s producer price report for business wholesale inflation unexpectedly jumped 1.8 percent. That leaves a 6.3 percent annual rate over the past three months and a 2.4 percent rate over the past year.

Taking out food and energy — which really shouldn’t be taken out — the PPI jumped 0.5 percent. Wholesale prices for consumer goods climbed 2.3 percent in the November report, and 0.6 percent excluding food and energy. Today's CPI report also might disappoint on the high side.

Of course, until very recently, gold has been soaring and the dollar declining. Commodity baskets also have been rising. These market-price indicators are not signaling deflation. They’re suggesting a higher inflation rate at the end of 2009 and spilling over into next year.

Meanwhile, industrial production for November surged 0.8 percent, leading to an annual rate of 5.6 percent over the past three months. This is a key economic-recovery indicator. The industrial report registered strong gains for durables, non-durables, consumer goods, business equipment, and construction supplies. There’s also the strong retail-sales report for November that came out last Friday. Business sales are rising, as are inventories.

Former Fed governor Wayne Angell, a dedicated commodity-price-rule advocate, believes that real economic growth in the next few quarters could run 5 to 7 percent, with 2 to 3 percent inflation. And he notes that with the clear warning from commodity indicators, there is simply no reason for the Fed to let inflation drift higher. He believes Bernanke should start an exit strategy immediately. That includes Wednesday’s policy meeting, where the Fed should remove the extended-period language and mark the beginning of the end of ultra-easy money.

Personally, I think the Fed’s target rate should be 0.5 percent right now, not zero. And I think the Fed should be moving toward 2 percent next year. The Fed should quit printing money by putting an end to the mortgage purchase program.

In the midst of Ben Bernanke’s reconfirmation vote — which is still up in the air in terms of its timing, with powerful voices like Senator DeMint and Senator Bunning raising serious questions about monetary policy — it is extraordinary to think that the Fed is tilting at the exact wrong windmill. Growth and inflation are going to beat the Bernanke Fed’s forecasts. And if it doesn’t change its easy-money stripes, it’s going to repeat the same easy-money mistake that has plagued the Fed for ten years. Why is it that these central bankers always err on the side of ease? And why do they seem completely disinterested in making dollars scarce?

As Wayne Angell has taught me down through the years, scarce money increases the greenback’s value. That keeps inflation near zero, and that’s a tax cut for economic growth.

Wednesday’s FOMC announcement will be at 2:15 p.m. I’m not excited about the outcome.